What the Big Beautiful Bill Does for OC’s Wealthiest

SALT Irrelevant for OC Wealthiest

One might expect that an increased State and Local Tax (SALT) deduction cap in the new tax bill would be front and center for the wealthy in Orange County, but with a $500,000 phase out and hard cap at $600,000 of income, that increased SALT deduction becomes totally irrelevant for the wealthy in Orange County (and based on limited itemizers between $200,000 and $350,000 of income, it is pretty irrelevant for most tax filers).

What is of primary interest in the new tax bill are the pro-growth elements of the business tax code: Bonus depreciation for new investment, full expensing for capital expenditures as well as Research & Development, higher deduction of interest expense for corporate borrowers, and the permanence of the enhanced small business tax deduction (20% for many LLC’s and S-corps). I would add that the Senate’s preserving of the PTET (pass through entity tax loophole whereby partners in LLC’s, S-corps, and partnerships can deduct their state tax burden beyond the SALT limits by paying through their entity) was probably the piece of this tax bill that most positively impacts the highest earners and highest net worth segments.

All in all, the extension of the personal tax rates from the 2017 tax bill, the extension of the standard deduction, the creation of so-called “Trump accounts,” and the various campaign promise tax cuts (no tax on tips or overtime, etc.) are not big needle-movers for the wealthy.  But the business tax side, especially because of the high R&D culture of Orange County’s business community and the heavy volume of professional services pass-through entities, has provided a lift that many OC investors are excited to see.

100% Bonus Depreciation ‘Huge’

Every one of our high-net-worth families is concerned about two things:

• They want a one-stop shop. So, we provide portfolio management, financial planning, lending advice and estate planning for the next generation transfer of wealth.
• Being in a high tax state like California, they are concerned not just with how much they are making, but how much they are keeping. There are three big opportunities to reduce their taxes: charitable giving; opportunity zones, which is a non-partisan issue; and investments that intentionally give off losses to lower taxes.

Their No. 1 question regarding the Big Beautiful Bill is how it will affect them personally. We go through the effects by comparing their taxes to a year ago. On the plus side, the tax rate overall is trending down. The 100% bonus depreciation is huge for our clients, many of whom are business owners. The increase in SALT to $40,000 is big. On the negative side, the rollback in clean energy, i.e. solar panels, is negative for the tech and energy sectors.

More Focus on Generational Wealth Transfer

The recently passed Big Beautiful Bill is prompting wealthy families to sharpen their financial strategies rather than overhaul them. With expanded estate tax exemptions, revised SALT deductions, and renewed Qualified Opportunity Zone legislation, affluent individuals are recalibrating how they manage wealth across generations.

Tax efficiency is a top priority. Advisors are accelerating charitable donations, optimizing pass-through entities and revisiting gifting strategies to lock in favorable terms. Interest in Qualified Small Business Stock has surged, thanks to higher exclusion thresholds and extended holding benefits.

Investment strategies are also evolving. Capital is flowing toward global diversification, tax-advantaged structures and sectors poised to benefit from regulatory shifts.

In essence, the bill is more evolution than revolution for high-net-worth clients extending tax law that was largely set to expire at the end of the year. It’s reinforcing long-term planning, encouraging more sophisticated tax mitigation, and prompting a renewed focus on intergenerational wealth transfer. As these concepts are above the typical advisor’s area of expertise, we’re seeing a lot of clients realizing this is a time of opportunity and have begun searching for the right advisor.

Estate Tax Exclusion Rises to $15M

Many Orange County residents will see immediate benefits to how they can plan their wealth and financial strategies, due to the new tax bill.

At J.P. Morgan Private Bank, we’re helping our high-net-worth clients in Orange County navigate this new tax landscape, and a few key items from the bill stand out in our discussions. In a high-cost area like Orange County, the increase in the gift and estate tax exclusion to $15 million, adjusted for inflation, is very helpful and eagerly anticipated by nearly all clients. This provision, especially, will be welcome to many in Orange County given our real estate values have significantly higher appreciation compared to other markets.
Business owners in Orange County will see the real benefits in the new tax bill. Bonus depreciation is back at 100% for qualified assets starting Jan. 20, 2025. Plus, the 20% deduction for pass-through entities is here to stay, encouraging business owners to rethink their setup.

The stock exclusion has increased to $15 million, with partial breaks for stock held for three or four years. The limit on gross assets has risen from $50 million to $75 million. And non-corporate taxpayers can now carry forward excess business losses as net operating losses.
For business owners and asset holders across Orange County, these changes offer a valuable opportunity for optimizing tax strategies and business structures.

Reinvestment in OC Could Increase

From my perspective, the bill has far-reaching implications for Orange County business owners and investors alike.

In a high income and high tax state like ours, I think the bill offers a number of wins with respect to real estate. With the SALT deduction cap increasing to $40,000 through 2029 and the $750,000 mortgage interest deduction made permanent, individuals may have more money in their pockets—especially over the next few years.

With respect to businesses, I’m excited by the permanent changes to Qualified Business Income deductions, R&D deductions, and 100% bonus depreciation (among others). These provisions not only reduce tax bills but may possibly put assets back into the pockets of business owners and may even enhance reinvestment in Orange County. Additionally, the significant permanent increases to Estate and Gift Tax exemptions offer business owners and individuals with exciting new options for legacy planning.

And although clean energy credits are being discontinued, so too is section 889 (known as the retaliatory tax). I believe this will encourage continued foreign investment in our highly attractive corner of California.

While the news may not all be good, I think this bill represents some great wins for Orange County business owners. I recommend businesses consult their financial and tax advisors to best use this bill to their advantage.

OC Lending Up for CRE, Residential

Overall, consumers remain resilient, with healthy spending and credit along with strong asset quality, investing and trading results. In Orange County, we have increased lending for both residential and commercial real estate for our clients. For example, our home equity solution has provided capital access to clients on appreciated value while retaining existing lower interest primary mortgages, and clients who are parents have been leveraging our “parent power” solution to help their adult children with loan qualification and down payment. We’re also seeing more affluent clients utilize our custom credit solutions to help with commercial real estate acquisitions.

Orange County clients also continue to be charitable, as we see a 50% increase in our Donor Advised Fund (DAF) solution. They’re utilizing highly appreciated assets to fund DAFs in ways that maximize the benefits to the qualified 501C-3 organizations of their choice, while reducing income tax burdens – a win-win for our clients and the community.

As a leader in wealth management and investment banking, we trade across a broad range of asset classes, serving clints through all economic cycles, markets and political climates. As tax rules change, we work to help clients understand how those changes impact their circumstances and plan accordingly.